Dear Members, We are pleased to present TransPrice Times for the first fortnight of January 2017. This periodical covers the treaty amending protocol between India and Singapore while also addressing key transfer pricing issues related to foreign tax credit, international transactions etc. We would be happy to know your suggestions. You can write to us at akshaykenkre@transprice.in Thank You and Happy Reading!! Kindly Click here on the link https://www.transprice.in/login.php for know your BEPS score in 10 steps

1. TransPrice Times
Edition: 1st
– 15th
January 2017
Contact us: 607A, 7th
Floor, Ecstacy Commercial Complex, City of Joy, JSD Road, Mulund (W), Mumbai –
400 080. Tel: 022-64640494; Mobile: +91 9819245424; email: akshaykenkre@transprice.in
Nike India Private Limited – ITAT –
Bangalore
Outcome: Partially in favour of taxpayer
Category: International transaction
Tax Court provides clarity in respect of
characterising a transaction as international
transaction within the meaning of Section 92B of
the Income-tax Act 1961.
Accordingly, the taxpayer shares cost with its AE
for promoting and building the Nike Brand under a
contract with BCCI for cricket sponsorship. As per
a contract between taxpayer and AE, the latter
bores 50% of the BCCI cost. Placing reliance on the
2 agreements, Tax Court rejects taxpayer’s views
and rules such cost sharing with AE as an
international transaction constituting a proper
understanding and arrangement for development
of brand which belongs to AE of the taxpayer.
Tax Court also rules in respect of local AMP
expenses incurred by taxpayer for promoting
products using only brand name of AE.
Accordingly, in absence of agreement or
arrangement in writing with AE, it cannot be called
an international transaction.
Elitecore Technologies Private
Limited – ITAT – Ahmedabad
Outcome: Against taxpayer
Category: Foreign tax credit (FTC)
The Tax Court opines on the eligibility of FTC
claimed by taxpayer.
Accordingly, taxpayer received payment from
Singapore and Indonesia, after deduction of tax at
source, and claimed a credit on the aggregate of
these tax deductions as FTC. However, the
intermediary authorities viewed FTC to be eligible
only to extent of income being taxed in India as per
actual MAT liability. The actual MAT liability was
taken in the ratio of corresponding foreign receipts
to overall turnover.
Taxpayer submits that it considered gross receipts
for computing the tax credit. Tax Court rejects this
argument and states ‘income’ to be considered for
FTC eligibility, not gross receipts.
Recent News:
Amendment to India – Singapore
Treaty
India has paved way for revising its tax treaty with
Singapore, following on par with changes in its
treaties with Mauritius and Cyprus recently. The
key change is the amendment to capital gains in
respect of alienation of shares. Now, a two year
period from 1st
April 2017 to 31st
March 2019, is
provided to allow a changeover from residence
based taxation to a purely source based taxation,
where taxation will be at 50% of the domestic tax
rate in the country of source. Further,
grandfathering provisions have been kept for
shares acquired before 1st
April 2017. However,
the above benefits shall be subject to a Limitations
of Benefits clause, if the resident intentionally
aligns its business to take advantage of the above
benefits.
In terms of BEPS implementations, the amended
treaty looks forward to achieve the minimum
standards by cracking MAP problems and avoiding
arbitration swiftly. Furthermore, the now
amended treaty gives both countries
independency in applying its domestic laws and
measures relating to tax avoidance or tax evasion.
CBDT Update on BEPS
Implementation
Following India’s active participation in the
construction of OECD and G20’s BEPS Project, India
has decided to usher in the new year with
constituting a committee towards ensuring fruitful
implementation of 15 BEPS Action Plans.
With equalisation levy, country-by-country
reporting, patent box already introduced, anti-
treaty abuse, CBDT has stated that it shall ensure
implementation of remaining BEPS Action Plans (
CFC to be the possible entrant in Budget 2017)
through amendments in Income-Tax Act 1961,
Rules or Guidelines.